Bernoulli without bayes: a theory of utility-sophisticated preferences under ambiguity, mimeo

audiences for helpful comments. A decision-maker is utility-sophisticated if he ranks acts according to their expected utility whenever such comparisons are meaningful. Assuming that probabilistic beliefs are minimally precise, we characterize utility sophisticated preferences and show that preferences over general multi-valued acts are determined by consequence utilities and betting preferences via a non-linear expectation operator, the “Bernoulli integral”. We provide a fully behavioral criterion for “revealed utility-sophistication” and, for preferences satisfying this criterion, propose a definition of revealed probabilistic beliefs that overcomes the limitations of existing definitions